July 2007 -

July 2007 -

Market Watch

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30th June proved to be a day of relief after the stocks bounced around for about a week. On 3oth the indexes rebounded partially. The reason for this rebound was General Motors Financing Division, whose results helped in the indexes to perform partly well! This might be quite surprising in the wake of the Subprime Lending rates being the cause of concern.

Other than GM, there were smaller deals which helped the market to bounce back atleast partially.

VC’s go Green?

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Two of my favourite topic caught my attention in CNet news, VC’s and alternate fuels, and in such a way that can kindle anybodys interest. Venture Capitalists showing interest in clean tech. start up’s! Yes according to a private survey more money is being poured into clean technology than never before, but the factor to be taken into consideration is their feasability in the long run. Because most of the alternate fuel sources cannot provide short term results! According to Jonathan Klein of Top line, Venture Capitalists are making investments cautiously infact building the investment process rather than create a bubble. Nanotechnology research company Lux Research found that clean tech research and funding were up by $48 billion. Whereas in case of Government and corporate funding were that of $24 billion – almost half.

So what does this mean? There might be a few cases where the funding might not get the appropriate results as alternate and clean technology do need a longer gestation gap to realise their potential but those who do emerge successful are sure to pave the way for the future. The VC’s would definetly see a mixed results for the time being but then risk taking and innovation are the basis on which VC’s operate and I definetly hope they realise the potentials of the real deserving firms!

Principles to Success

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I was going through the ‘Harvard Business Review’ and came across a very interesting article, which I would like to share with all of you. ‘The Four Principles of Enduring Success’ by Christian Stadler. Stadler along with Hans Hinterhuber and Franz have conducted the ‘Enduring Success Project’ and have come up with some of the best know principles that ‘performing companies’ would follow.

The goal is to understand why companies managed to perform at a very high level over a very long period of time. What do we learn from their experience?

The research extended not only to the American corporates but to the European companies too. The project yielded four main findings or what would be called as the “Four Principles of Enduring Success”

Let me give you the brief of the principles
a. Exploit before your explore
b. Diversify your business portfolio
c. Remember your mistakes
d. Be conservative about change.

Guess the heading themselves are self explanatory though stadler goes on to explain in detail about the principles in his article.

Giving example of Nokia, Stadler explains how Nokia deviated from principles and suffered due to the same, realized their mistake and turned to performance again!

He has given example of Top companies along with the comparison companies and has researched in detail about the various features followed. Some of the top companies taken for comparison were Siemens, Nokia, Allianz, Legal & General, Munich Re and Royal Dutcshell and the companies in comparison are AEG, Ericsson, Aachener and Munchener, Prudential, Cologne Re.

I must say that a real in depth analysis was made and conclusion which seemingly look so age-old does definetley work.

U.S Market on a new high!

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The stocks rose to 3%. The reason for this rise was due to Boeing and Energy sector. Amazon.com Inc profits led to a 24% rise in the stock market. U.S. oil prices jumped to $75.88 per barrel. Shares of energy sector like that of EXXON Mobil led to a rising of 2.2 percent leading to a rise of $92.79.

There is major voltality after the fall off on Tuesday. After the bell sounded on Wednesday, iPod and iPhone rose 2.4 percent to $140.50 The stocks were the among the top gainers of NASDAQ.

Stocks seemed to have shown lesser reaction to the economic news. The other question is if there is any factor would lead to a steep fall that the market experienced on Tuesday!

Facebook going for a Makeover!

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Gideon Yu, You Tube’s former Financial Officer, is all set to join Facebook, as its Chief Financial Officer. He is replacing Mike Sheridan of Facebook. Why Sherdian is leaving Facebook, seems to be unclear. There seems to be a likelihood of a possible sale or going public in the coming times. The employees of Facebook would definetly gain if any of these happens.But Facebook is denying any such report of a possible sale or getting into IPO.

Greenspan’s Impact.

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His last speech might have left many speechless, after he commented on ‘China Economy’. But now he has tracked the path of the present liquid situation in the market, to the saving habit of the ‘developing nations’. He was talking to “Building owners and Manager Association’s International Conference in New York. Adding to the reason for liquidity Greenspan has reiterated the fact that it’s reflective of a one shot thing, and that we are only half-way through the same.
Craig Torres and Anthony Massucci’s article in Bloomberg.com reports on Greenspan’s views on various topics from the liquidity in the market to oil. Greenspan goes on to say that the market will have to confront the gradual decline in foreign savings flow. Though the dollar has dropped about 4.5% against the Euro, this drop has not dampened the spirit of investment in U.S. Securities. Citing the case of China which has emerged as one of the major exporter in the world, the U.S Dollars earned by the economy was ploughed back into the U.S itself in terms of securities, but again with increased income, consumption would increase in China and the outflow would gradually decline.
Reiterating the fact that U.S has to reduce its dependency on oil, Greenspan goes on to say that the only way to reduce the consumption is to increase the price and this seems to be happening right now!
This article really gave an insight into the flow of the fund and the reason for the markets ‘doing well’ in spite of the dollars “doing not so well”

Barclays’ move

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More interesting development in the ABN front. Now that ABN Amro has chosen Barclay. Barclays in on a hunt to bring in about $10 billion pounds to purchase ABN Amro. Barclays has approached China and Singapore to raise this amount. If the talks comes through then China would hold 7% of the stake and Singapore about 3% through Temasek, its investment holding company.

Barclays had already agreed to put in more cash to it already agreed amount of 65 billion Euro ($90 billion)
With the participation of two Asian Government the entire deal has now has a fresh look to it!

Home coming

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Our in-house sailor had decided to cross seas again, but this time for a vacation!
I am talking about Vinod Muthukrishnan, who came back after a short vacation to Europe- Paris and Amsterdam mainly. He looked all rejuvenated and fresh, guess he is all ready for the tasks ahead! Hey and bought me a very good imitation of ‘Mona Lisa’ all the way from Paris!
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Vinod surely seem to have had a great vacation, and looking forward for his next task at INXS, who dosent after all we live life IN EXCESS!

Impressive Numbers!

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Robert Holmes article on ” The Dow closes Above 14,000 for the First Time” gives a detailed report on the Numbers. On Thursday, the Dow finished above 14,000 for the first time rising to 82.19 points. Nasdaq was also on a high on Thursday, its best in six years time. Quoting Art Hogan (Chief Market Analyst, Jeffereis) “Finishing above 14,000 on the Dow is not necessarily a breakthrough in Technical Terms although it is an important psychoogical one”. Another very important aspect was that about 3.26 billion shares changed hands in the New York Stock Exchange.

During the Federal Open Committee Meeting, the rate was left unchanged at 5.25%. The Fed seems to have decided to keep the rate unchanged (therby squashing any hope of reduced rate!) and the panel are also having a watchful eye on Inflation. The concern voiced during the meet was about the housing sector downturn and that it might persist for a longer period of time.

I feel that the Fed’s stand might be the same on the rate for some time, but the housing sector has become a major concern for all, along with Inflation. If the downturn in the housing sector persists for a longer period it is bound to affect the economy, and the Fed’s better take measures on the same.

Happenings!

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The recent talk on M&A is that of Nestle and Pepsico., It is rumoured that the first step was taken by Pepsi who had approached Nestle for a possible merger. But looking at the market that pepsi is concentrating such a merger might be doubtful. Looks like Nestle is also resisting the idea, as Pepsi is known for promoting a lot more soda and snacks, while Nestle tries to promote wellness. Do understand that Pepsi is a $108 billion market and Nestle’s market has about $150 billion value in the market.

But now Pepsi is trying to diversify and is no more concentrated on the soda and chips category. Indira Nooyi has been instrumental in Pepsi’s buying of Tropicana and Quakers Oat Meal, a very healthy approach indeed! But this might affect their position in the market.

Also Pepsi’s next step or acquistion has gained much more importance after Coca-Cola realised its stand and is going on an acquisition and innovation spree. Also Pepsi’s growth seems to have been more or less saturated and only its International divisions like that of Frito-lays and beverages are bringing in 50% of its revenue. So a merger with Nestle will only give it a more International reach!

So even if the merger with Nestle might not take place, Pepsi needs to be aggressive and try to diversify and cross over borders to grow!

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